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Assume that any money lent by a bank is deposited back into the banking system as a checkable deposit and that the reserve ratio is 10%. Trace out the effects of a $100 million open market purchase of U.S. Treasury bills by the Fed on the value of checkable bank deposits. What is the size of the money multiplier

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abiolataiwo2015

Based on the information given the size of the money multiplier is 10.

Size of money multiplier:

In order to find or determine the size of the money multiplier we are going to make use of money multiplier formula.

Using this formula

Money multiplier=1/r

Where:

r=Reserve ratio=10% or 0.10

Let plug in the formula

Size of money multiplier=1/0.10

Size of money multiplier=10

Inconclusion the size of the money multiplier is 10.

Learn more about the size of the money multiplier here: https://brainly.com/question/26198303

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